To Bail or to Bail Out

To Bail or to Bail Out: The Futures of the Detroit Three, by Mark Chussil

What to “do about” the Detroit Three is, deservedly, front-page news. You, I, and Congress hear about incompetent management, structural labor inefficiencies, uncompetitive products, and much, much more.

The past is past but the future is not, and there is not just one possible future for the D3. Now is the time to look forward and foresee what, in a few years, will make us glad for our foresight or wonder once again how we could have missed an opportunity.

Both sides of the bail/bailout debate have points, and both sides paint excessive pictures. For instance, if the D3 all go bankrupt, it is fantastically disruptive to hundreds of thousands, perhaps millions, of people. On the other hand, bankruptcy does not mean that they close their doors, never to return, any more than it meant that Delta and United were permanently grounded. For another instance, if we the taxpayers rescue bad decision-makers, we may be tossing away $25 billion to no avail. On the other hand, we the taxpayers will face a stiff bill either way: if not a loan or loan guarantee, then the loss of many jobs, corporate tax revenue, and so on.

The $25 billion question is too important to answer with an expression of (or an experiment in) ideological purity, a split-the-difference compromise, a roll of the dice, or a verdict assigning blame. Yes, the executives made bad decisions. Yes, union work rules got too restrictive. Yes, our nation’s unwillingness to support universal health care saddled the D3 with costs their competitors didn’t have to bear. Yes, we the consumers fed the D3’s addiction to gas guzzlers and then we deserted them. Yes, there’s more. So what? What do we do now?

We humans are simply not equipped to play chess games of this magnitude in our heads. Let’s get as creative about how we solve our problem — to bail or to bail out — as we want the D3 to be in solving theirs.

I recommend that Congress and the industry commission business war games on behalf of the industry, the workers, the government, and we the people. Multiple games, in parallel, to explore multiple futures. (Contrary to popular belief that “it’s obvious” what should be done, there are always stunningly different possibilities to discover and explore.) Games that include actual industry executives (including some to role-play the competition), actual union executives, actual government officials, actual advertisers, actual consumers, actual taxpayers. Let the games simulate different paths through the thicket: the government bails or bails out; competitors pounce on buyers and/or snap up bargains; unions make this concession or that investment; advertisers make the pitch to real people; real people react.

Give, guarantee, or loan the D3 enough cash to get through the next few months while the games get set up and run. Have Congress observe and analyze the games, full transparency. Although the cost of such games would be almost absurdly immaterial, a spark-plug’s worth of the $25 billion being bandied about, have the industry pay for the games in return for the few months of operating cash. More importantly, have the industry commit to act on an independent, nonpartisan analysis of the games. Have people in traditionally adversarial relationships participate too, in particular labor and dealers. War games’ ability to help people see through others’ eyes leads to consensus and shared commitment to act.

Such a process would demonstrate a commitment to the change in Washington for which we just voted. It’s a commitment to make good decisions, not partisan decisions. It’s a commitment to get real and to take action that might actually succeed.

Democrat, Republican, management, labor, breadwinner, taxpayer. What everyone needs regarding Detroit is better decisions in Detroit. There’s no better way to get those better decisions than to generate and stress-test ideas in a safe, realistic environment before we commit billions of dollars and risk millions of jobs.

Update. With financial support from the US government, GM and Chrysler entered and exited bankruptcy. GM has shed several of its brands as part of its plan to return to profitability. Sergio Marchionne, CEO of both Chrysler and Fiat (Chrysler’s new partner), acknowledged the need to sell vehicles now: “If there is a month where I have to sell 40 percent of my volume as fleet, I will.”  He also said, at the same auto-industry event, that Detroit has “almost a fanatical, maniacal interest in [market] share” and that “unprofitable volume is not volume I want.”